Part A) For each of the following statements, indicate whether it is true or fal
ID: 3184401 • Letter: P
Question
Part A) For each of the following statements, indicate whether it is true or false and justify your answer. (30 points) I) When your multiple regression function includes a single omitted variable regressor, then the estimator for your included regressors will always be biased. 2) If adding an additional explanatory variable to a multiple regression reduces the error sum of squares, we should add that variable 3) In a study relating college GPA to time spent in various activities, the students are asked how many hours they spend each week in studying, sleeping, working and leisure. Any activity is put into one of the four categories, so that for each student the sum of hours in the four activities must be 168. Then Sinem formulated the following model: GPA= ' + f32 study + /, sleep + 4 work + 5 leisure + & Nevzat claims that something is wrong with this model. Do you agree? Explain.Explanation / Answer
1. Correct Answer- False the estimator for your included regressors will be biased if at least one of the included variables is correlated with the omitted variable.
2. Correct Answer- True. If additional variables do not produce large enough increases in R2 , then putting them in the model can actually decrease F. Hence, if there is too much “junk” in the model, it may be difficult to detect important effects.
3. Correct Answer- Yes, I do agree with Nevzat.
The model shows that the sum of all the variables is 168 (study + sleep + work + leisure = 168). Therefore, if we want to make changes in study, we must change at least one of the other categories so that the sum is still 168.
By dropping one of the independent variables, for example, leisure: GPA = 0 + 1 study + 2 sleep + 3 work + €. Now, for example, 1 is interpreted as the change in GPA when study increases by one hour, where sleep, work, and € are all held fixed. If we are holding sleep and work fixed but increasing study by one hour, then we must be reducing leisure by one hour. Therefore, it may be concluded that the model needs revision.